Supreme Court of Rhode Island. Clark, Administrator of Ross, v. Allen

STOP

Early Journal Content on JSTOR, Free to Anyone in the World

This article is one of nearly 500,000 scholarly works digitized and made freely available to everyone in
the world by JSTOR.

Known as the Early Journal Content, this set of works include research articles, news, letters, and other
writings published in more than 200 of the oldest leading academic journals. The works date from the
mid-seventeenth to the early twentieth centuries.

We encourage people to read and share the Early Journal Content openly and to tell others that this
resource exists. People may post this content online or redistribute in any way for non-commercial
purposes.

Read more about Early Journal Content at http://about.jstor.org/participate-jstor/individuals/early-
journal-content .

JSTOR is a digital library of academic journals, books, and primary source objects. JSTOR helps people
discover, use, and build upon a wide range of content through a powerful research and teaching
platform, and preserves this content for future generations. JSTOR is part of ITHAKA, a not-for-profit
organization that also includes Ithaka S+R and Portico. For more information about JSTOR, please
contact support@jstor.org.

CLARK v. ALLEN. 83

stock transferred to her on the books of the corporation. Subse-
quently, A. executed two codicils, declaring that he cherished to
B. the feelings of a father, but made no allusion in them to the
transfer of stock which had been made only a short time before.
After A.'s death the certificates were discovered in an envelope in
his writing-desk, directed to himself and with his name in one
corner. A. had never mentioned the fact of the transfer to any
one, except as above stated, and had given no explanations of his
intention. The value of the certificates was not out of proportion
to the size of his estate, which was large, considering the relation
of the parties. Held, that the gift was executed, though the certi-
ficates had been retained by the donor, and that the circumstances
of the case rebutted the presumption of a resulting trust.

A. Sydney Biddle.

RECENT AMERICAN DECISIONS.

Supreme Court of Rhode Island.
CLARK, Administrator of ROSS, v. ALLEN.

A policy of life insurance is a chose in action.

The sale and assignment of a life policy, outstanding and valid, and containing
no prohibition of such alienation, is good, though made to one who has no interest
in the life insured, provided such sale and assignment is a bona fide business
transaction, and not a device to evade law.

Query: Whether in Rhode Island a person can legally take out an original
policy on a life in which he has no interest ?

Assumpsit for money had and received, tried to the court, jury
trial being waived. It appeared that on the 26th December 1868
one Edward T. Ross got his life insured for $2000, payable to his
wife at his decease. His wife was a second wife. He had children
by his former wife, but none by her. She died before him, August
21st 1871. He was then in infirm health and short of means. He
did not pay one premium promptly. The company, however,
accepted payment afterwards and issued the policy anew, payable
to his legal representatives. On the 2d of January 1872 he
assigned the policy to the defendant, and received the defendant's
note for $125, which was paid April 10th 1872. The surrender
value of the policy at the time of the assignment was $118. The
defendant was Ross's brother-in-law. After the assignment, which
was assented to by the insurers, the defendant paid five quarterly

84 CLABK v. ALLEN.

premiums of $25 each. Boss died March 24th 1873. The defend-
ant collected on the policy $2121.20. The plaintiff, who was
administrator on Ross's estate, brought this action to recover that
amount, less the amount of the note for $125, and the five quarterly
premiums with interest.

Charles Hart, for plaintiff.

James Tillinghast, for defendant.

The opinion of the court was delivered by

Durfee, C. J. — The plaintiff claims that the assignment was
made as security for a loan, and not as an absolute sale. Testi-
mony was submitted on this point. We think the assignment was
intended to be an absolute sale.

The plaintiff contends that if the assignment was an absolute
sale, it was void as against public policy, and that he is therefore
entitled to recover the money received on it, less the payments
aforesaid, as money received to his use. The defendant claims
that the assignment, though absolute, is valid, and that he is
entitled to keep the money as his own.

Upon the question thus raised there is a conflict of decision. In
Massachusetts and Indiana it has been decided that a life policy is
not transferable outright to a person who has no interest in the life
insured : Stevens, Adm'r, v. Warren, 101 Mass. 564 ; Franklin
Life Ins. Co. v. Hazzard, 41 Ind. 116. A similar decision (but
in a case having peculiar circumstances) has been made by the
Supreme Court of the United States : Cammack v. Lewis, 15 Wall.
643. The reason given is, that it is unlawful for a person to pro-
cure insurance for himself on a life in which he has no interest, and
that therefore it is unlawful for him to ( take an absolute assignment
of a policy upon a life in which he has no interest ; for otherwise
the law could always be easily circumvented by first having- a per-
son get his own life insured and then taking an assignment of the
policy. And it is also argued that the gambling or wagering ele-
ment is the same, and the temptation to shorten the life insured is
the same in the one case as in the other.

But, on the other hand, it has been decided in England that such
an assignment is valid : Ashley v. Ashley, 3 Sim. 149, cited with-
out disapproval by Chancellor Kent, in 3 Kent's Com. 369, note.
The reason given is, that such an assignment is not within the pro-

CLARK v. ALLEN. 85

hibition of the English statute, 14 Geo. III., cap. 48, and that the
policy, being valid in its inception, is, like any other valid chose in
action, assignable at the will of the holder, whether the assignee
has an interest in the life insured or not. This view has been
repeatedly affirmed in New York : St. John v. American Mutual
Life Ins. Co., 2 Duer 419 ; also in 13 N. Y. 31, on appeal ; Vol-
ton v. National Fund Life Assurance Co., 20 N. Y. 32 ; and see
Cunningham et al. v. Smith's Admir, 70 Penna. St. 450.

We think the assignment was valid. A life policy is a chose in
action, a species of property, which the holder may have perfectly
good and innocent reasons for wishing to dispose of. He should be
allowed to do so unless the law clearly forbids it. It is said that
such an assignment, if permitted, may be used to circumvent the
law. That is true, if insurance without interest is unlawful ; but
it does not follow that such an assignment is not to be permitted at
all, because, if permitted, it may be abused. Let the abuse, not
the bond fide use, be condemned and defeated. See Shilling, Adm'r,
v. Accidental Death Ins. Co., 2 H. & N. 42. It is not claimed
that the parties to the assignment here in question had any design
to circumvent or evade the law. Perhaps Cammack v. Lewis, 15
Wall. 643, supra, may be found to be a case of that kind.

Again, the assignment is said to be a gambling transaction, a
mere bet or wager upon the chances of human life. But the
wager was made when the policy was effected, and has the sanc-
tion of the law. The assignment simply transfers the policy, as
any other legal chose in action may be transferred, from the holder
to a bond fide purchaser. It is true there is an element of chance
and uncertainty in the transaction ; but so there is when a man
takes a transfer of an annuity, or buys a life estate, or an estate
in remainder after a life estate. There is in all these cases a spec-
ulation upon the chances of human life. But the transaction has
never been held to be void on that account.

But finally it is urged that the purchaser or assignee subjects
himself to the temptation to shorten the life insured, and that this
the policy of the law does not countenance. The law permits the
purchase of an estate in remainder after a life estate, which ex-
poses the purchaser to a similar temptation. It has been decided,
too, that a policy effected by a creditor on the life of his debtor
does not expire when the debt is paid, though the holder then
ceases to be interested in the continuance of the life, and is there-

86 CLAKK v. ALLEN.

after exposed to the same temptation which is supposed to beset
the assignee ■without interest, to bring it to an end : Dally v. India
$• London Life Assurance Co., 15 C. B. 365; Law v. London
Indisputable Life Policy Co., 1 Kay & J. 223 ; Pawls v. Amer.
Life Insurance Co., 3 Am. Law Reg. N. S. 167, s. c. 27 N. Y.
282 ; Campbell v. N. E. Mutual Life Insurance Co., 98 Mass.
381 ; Provident Life Insurance $ Invest. Co. v. Baum, 29 Ind.
236.

If the danger is not sufficient to avoid the policy when the in-
terest ceases, why should it be sufficient to avoid the assignment
to an assignee without interest ? The truth is, it is one thing to
say that a man may take insurance upon the life of another for
no purpose except as a speculation or bet on his chance of life,
and may repeat the act ad libitum, and quite another thing to
say that he may purchase the policy, as a matter of business,
after it has once been duly issued under the sanction of the law,
and is therefore an existing chose in action or right of property,
which its owner may have the best of reasons for wishing to dis-
pose of. There is in such a purchase, in our opinion, no immo-
rality and no imminent peril to human life. We should have
strong reasons before we hold that a man shall not dispose of his
own. Courts of justice, while they uphold the great and univer-
sally recognised interests of society, ought nevertheless to be cau-
tious about making their own notions of public policy the criterion
of legality, lest, under the semblance of declaring the law, they
in fact usurp the function of legislation : Hilton v. Pckersley, 6
El. & B. 47, 64.

We therefore decide that whatever the law of this state may be
in regard to procuring insurance upon the life of another without
any interest in the life insured, it does not forbid the sale and
assignment of a valid policy, which is already in existence, to an
assignee without interest in the life insured, when the assignment
is permitted or not prohibited by the policy, and is made, not as a
contrivance to circumvent the law, but as an honest and bond fide
business transaction.

Judgment for defendant for his costs.

In some of the cases in which con- and the right of property which the as-

tracts relating to life insurance have sured has in the policy as a chose in

been attacked as wagers or gambling action. In the principal case, however,

contracts, the courts seem to have over- the right of the owner of such a policy

looked the true nature of these contracts to appropriate or dispose of it, as of any

CLARK v. ALLEN.

87

other property is fully recognised, and
the decision is sustained by the weight
of authority in this country and in Eng-
land.

The cases illustrating the principles
upon which this decision is founded may
perhaps profitably be considered under
four heads : —

1. The extent of the right of a cred-
itor to insure the life of his debtor, and
the effect upon such right as between
the creditor who effects such insurance
and the insurer of the extinguishment
of the debt.

2. How far, and under what circum-
stances, one, for whose benefit a policy
of life insurance is effected, may assign
the policy, including the power of a
married woman for whose benefit an
insurance is effected on the life of her
husband to assign her interest in such
policy.

3. Under what circumstances such an
assignment, though absolute in terms,
will be regarded simply as collateral
security to the assignee, and when the
assignor or his personal representatives
will be entitled to recover from the
assignee the amount of the policy less
the debt which the policy was assigned
to secure, and the purchase-money and
premiums paid by the assignee, together
with interest.

4. Who is entitled to the proceeds of
a policy of life insurance when the
party for whose benefit it is effected died
before the one whose life was insured.

1 . The first class of cases are those
in which the original contract of insu-
rance is made by a creditor with the in-
surance company, the one whose life is
insured having nothing whatever to do
with the contract, except perhaps, under-
going an examination by the medical
examiner of the insurer. It is very im-
portant to keep entirely distinct cases
of this class, from those in which the
contract of insurance is made in the
name of, and the policy is taken out by,
the party whose life is insured. The

failure to observe this distinction and
the endeavor to base rules of decision
for one class of these cases from decided
cases of the other class has been the
cause of much of the confusion to be
found in this branch of the law. It is
also to be noticed that in most of the
United States these contracts stand en
a different footing from those made in
England. The statute of 14 Geo. III.,
c. 48, enacting that " no insurance shall
be made by any persons on the life of
any person for whose use, benefit, or on
whose account such policy shall be made
shall have no interest, or by way of
wagering," is not in force in this coun-
try. The only limit to the right of ef-
fecting a valid insurance upon the life
of another is the refusal of the courts
from motives of public policy to enter-
tain suits based upon simple wagers or
gambling contracts ; as was said by
Sergeant, J., in Edgcll. v. McLaughlin,
6 Whart. 176, ''Courts of justice are
instituted to determine the disputes
among men, necessarily arising from
their existence together in society. The
time and labor of a large class of its
citizens are devoted to the adjustment
of these disputes at a great expense to
the community, and this class is as neces-
sary to the welfare of society as the ex-
istence of any of the occupations in
which men do for others what they can-
not do for themselves. But in the innu-
merable contentions that human affairs
originate, there is sufficient to engross
the time and labor of its tribunals
without occupying them in the investi-
gation of gratuitous contests such as
wagers, which flow sometimes from a
spirit of gambling, sometimes heat of
passion, and sometimes from folly and
indiscretion on the one side and strata-
gem and cunning on the other. Hence
the more intelligent judges of modern
times have revolted at examples of this
sort of suit, which have been sustained in
a court of justice, such as that in 5 Bur-
row 2802 of two sons wagering on the

88

CLARK v. ALLEN.

lives of their fathers, and other judges
have undertaken to refuse to try such
suits, on the ground that the wager was
impertinent or frivolous, and have
turned the plaintiffs out of court. * * *
" In Phillips v, Ives, I Rawle 458,
Hustok, J., expresses his opinion very
plainly, that though bets were recover-
able by the common law of England, it
was not a part of the common law in-
troduced into Pennsylvania, by William
Penn or his successors, nor recognised
in the Act of Assembly, passed in 1777,
which is our guide on that subject. And
I fully concur with him that it is not.
When I look back to the character and
principles which actuated our founders
and predecessors, I am satisfied they
never countenanced such a principle,
but left parties who chose to embark
into contracts of this kind, to recover
as they could, according to the code of
honor under which they originated ; and
that it is derogatory to the character
and injurious to the interests of the com-
munity to sanction them, and to employ
their legal tribunals in investigations
often indecent, often inflammatory, often
impertinent and frivolous, and always
useless, if not noxious in their effects
on society." Therefore, whenever a
plaintiff can show that his intention in
effecting the insurance was not to spec-
ulate upon the continuance of the life
insured but to bond fide protect himself
against some loss, which he might
fairly anticipate would be suffered by
him by the death of the party whose life
was insured, the policy will be sustained,
even though the plaintiff may not be
able to show in figures the exact
amount of such anticipated loss, or
even that the loss certainly ever will be
incurred upon the death of the party
upon whose life the policy was issued.
This doctrine is very well illustrated
by several cases which arose several
years ago in the time of the California
gold excitement, when parties residing
in the east advanced small sums of

money to adventurers for their outfit,
with an agreement that they should re-
ceive a share of the profits of the ad-
venture, and then effected an insurance
on the lives of those going out, in
amount much greater than the sum ad-
vanced. If the right to effect such an
insurance was dependent upon and com-
mensurate with some fixed debt due,
these policies would have been void for
everything beyond the amount actually
advanced. But in every instance in
which these policies became the subject
of litigation they were sustained : Mil-
ler v. Eagle Life Ins. Co., 2 E. D.
Smith 268 ; Hoyt v. New York Life Ins.
Co., 3 Bosw. 440; Murrell v. Trenton
Life Ins. Co., 10 Cush. 282 ; Bevin v.
Connecticut Life Ins. Co., 23 Conn. 244.
It therefore is clear that it is not the
loss of a debt arising from the death of
the party whose life is insured that the
insurance company agrees to indemnify
the creditor against, because if such was
the nature of the contract, the plaintiff,
before he could recover on such policy,
would be obliged to prove not only
the death but also that the estate of his
debtor was insolvent. Por, to this ex-
treme conclusion we must go, if the
contract of life insurance is to be re-
garded as one purely of indemnity
against certain pecuniary loss. Neither
is it necessary under our American de-
cisions that the debt which entitles a
creditor to insure the life of his debtor
should be one which could be enforced
in a court of law. A moral obligation
on the part of the debtor to pay the
money is sufficient, for the existence of
such obligation gives the creditor an
interest in the continuance of the life
of his debtor ; for the debtor, while he
lives, by payment of the debt, may re-
lieve himself from that obligation.
This principle is exemplified in Rivers
v. Gregg, 5 Richardson Eq. 274, where
an insurance by a creditor upon the
life of his infant debtor was sustained,
although no action could have been

CLAEK v. ALLEN.

89

maintained against the infant for the
debt, which was not contracted for
necessaries furnished ; and so in Rawlsv.
Am. Life Ins. Co , 3 Am. Law Keg. N. S.
1 67 , it was said that a creditor whose debt
had been barred by the Statute of Lim-
itations, was still entitled to insure the
life of his debtor. " Regarding the
policy in this case as substantially a
contract of indemnity against the loss
of the plaintiff's debt, and that as an
interest was required to support its in-
ception, a continuance of that interest
is essential to its perpetuity, there was
no pretence that the debt or any part of
it had been paid. All that the case
showed was that the Statute of Limita-
tions had apparently run against the
demand of the plaintiff at the death of
the insured. But suppose the statute
had attached, the interest of the plain-
tiff as a creditor in the continuance of
the life of his debtor had not ceased en-
tirely. The debt was not extinguished
as in the case of payment. It might be
renewed by a new promise, and indeed
without such promise be enforced by
action, unless the defence of the statute
was directly interposed. It is not a
legal presumption that when the Statute
of Limitations has once run, the debtor
will refuse to revive the debt by a new
promise, or interpose the defence of the
statute in an action to recover it."

Another important principle has been
established in the American cases, and
is now recognised in the English courts,
that it is enough if the party effecting
an insurance had an insurable interest
in the life insured at the inception of
the policy, and it is not necessary that
this interest should continue and exist
at the time of the death of the person
whose life is insured. So that the in-
surer cannot defend against the payment
of the policy, upon the ground that the
creditor effecting it has received the debt
from his debtor. There is a full and
clear discussion of this question in Law
v. London fns. Co., 1 Kay & J. Ch. 223,

Vol. XXVI.— 12

where Sir W. Page Wood, V.-C, says,
" Policies of insurance against fire or
marine risk are contracts to recoup the
loss which parties may sustain from par-
ticular causes. When such loss is made
good aliunde the companies are not
liable for a loss which has not occurred,
but in a life policy there is no such pro-
vision. The policy never refers to the
reason for effecting it. It is simply a
contract that in consideration of a certain
annual payment, the company will pay
at, a future time a fixed sum, calculated
by them with reference to the value of
the premiums which are to be paid, in
order to purchase the postponed payment.
Whatever event may happen meanwhile
is a matter of indifference to the com-
pany. They do not found their calcu-
lations upon that, but simply upon the
probability of human life, and they get
paid the full value of that calculation.
On what principle can it be said that
if some one else satisfies the risk on ac-
count of which the policy may have been
effected, the company should be re-
leased from their contract. The com-
pany would be in the same position,
whether the object of the insured were
accomplished or not ; whether he were
in a better or worse position could have
no effect upon the contract with the
company, which was simply calculated
upon the value of the life which they
had to insure."

2. Of an entirely different class, and
to be determined by entirely different
principles, are the cases in which a party
effects an insurance on his own life,
and then immediately appoints some
other person as the beneficiary, or at a
subsequent period assigns to another,
either by way of gift, or for a consider-
ation, the right to receive the proceeds
upon his death. On no sound principle
can this right be doubted. Every per-
son has the right to effect an insurance
on his own life, and a contract so made
can never be avoided by the insurer as
a wagering contract, because some third

90

CLARK v. ALLEN.

party by a private arrangement made
between himself and the insured becomes
entitled to receive the insurance money.
Where, as in Pennsylvania, the com-
mon law forms of procedure are main-
tained, and the assignee of a contract is
obliged to sue in the name and on the
right of the original contractor, it is
very plain that the defendant cannot set
up a defence to a contract so made, that
it would have been contrary to the pol-
icy of the law if made with the use
plaintiff. The confusion has been in-
troduced into the decisions of some
other states by the loose forms of plead-
ing and procedure misleading the courts
into viewing the contract as one made
with the assignee, who sues as the legal
plaintiff, and then letting in pleas framed
upon that hypothesis, which if the hy-
pothesis were true might be sustained.
This is one of the many illustrations of
the fact that innovations upon the com-
mon law procedure are to be made
slowly and with great care, for in seek-
ing to rid ourselves of forms which seem
to be cumbrous, we may involve our-
selves in confusions from which the use
of these forms would preserve us. Still,
however, the weight of authority is in
favor of the sounder doctrine that one
effecting an insurance on his own life,
becomes thereby the owner of a chose
in action which he may dispose of either
by way of gift or sale, without affecting
the validity of the policy, except in so
far as the rights of the parties are gov-
erned by the express terms of the policy,
many of the policies containing a condi-
tion avoiding the policy upon an assign-
ment without the assent of the insurer.
In such a case the terms of the policy
must be complied with.

In St. John v. American Life Ins. Co.,
13 N. Y. 31, N. insured his own life,
payable to himself, his executors, ad-
ministrators and assigns ; he subsequent-
ly assigned it to St. John, the plaintiff,
who paid for it a small amount compared
with the face value of the policy. The

insurance company, upon the death of
the insured, claimed that St. John was
only entitled to receive the amount he
had paid for the policy with interest and
the premiums paid by him subsequent to
the assignment. The plaintiff, however,
was held to be entitled to receive the
full amount insured, the court saying,
" Policies of insurance are choses in
action, they are governed by the same
principles applicable to other agree-
ments involving pecuniary obligations.
It is not necessary that the assignee
should have an insurable interest in the
life of the insured in order to entitle
him to recover the amount of insurance.
If the policies were valid in their incep-
tion, the assignment of them to the
plaintiff did not change the liability of
the company." In Valton v. National
Ins. Co., 20 N. Y. 32, in a similar case,
the court said, " Upon the trial there
was no proof but that S. obtained the
policy for his own benefit. If he so
obtained it, he had the right to dispose
of it as he saw fit, and it would be no
defence against his assignees that they
had no interest in his life." The court
here seems to take it for granted that if
S., whose life was insured had combined
at the issuing of the policy with Valton,
to whom the policy was assigned, to
thus effect for Valton an insurance upon
a life in which he had no interest, the
company might have a better ground of
defence. To sustain such a defence,
the burden of proof would be upon the
company to show a fraudulent combina-
tion to impose upon them. But where
there is no attempt to conceal from the
company the real parties in interest and
the company assents to the appointment
of any particular person to receive the
proceeds of the policy when it becomes
payable, there is no principle of law or
public policy which prevents one who
insures his own life from having the
policy at its inception marked to the use
of any one to whom he may see fit to
donate it.

CLARK v. ALLEN.

91

Provident Life Ins. Co. v. Baum, 29
Ind. 236. In this case a policy was
taken out by A. on his own life, and
made payable to B. In an action by
B. against the company the court
said, " The position assumed by the
company in argument that this policy
is one of indemnity and that the
plaintiff must show an interest in the
life of the assured does not, we think,
arise in this case ; the policy in terms
declares that the company insures A.
Baum against loss of life in the sum of
§3000. It cannot be questioned that a
person has an insurable interest in his
own life, and that he may effect such
insurance and appoint any one to re-
ceive the money in case of his death
during the existence of such policy. It
is not for the insurance company, after
executing such a contract and agreeing
to the appointment so made, to question
the right of such appointee to maintain
the action. If there should be any con-
troversy as to the distribution among
the heirs of the deceased of the sum so
contracted to be paid it does not con-
cern the insurers. The company con-
tracted with the insured to pay the
money to the plaintiff, and upon such
payment being made it will be dis-
charged from all responsibility. So far
as the insurance company is interested
the contract is effective as an appoint-
ment of the plaintiff to receive the sum
insured."

In Campbell v. New England Ins. Co.,
98 Mass. 381, A. effected an insurance
on his own life, and designated the
plaintiff, who had no direct interest in
his life, as the recipient of the proceeds.
In sustaining the policy, the court said :
" It is the interest of A. in his own life
that supports the policy. The plaintiff
did not, by virtue of the clause declaring
the policy to be for her benefit, become
the assured. She is merely the person
designated by agreement of the parties
to receive the proceeds of the policy
upon the death of the assured. It was

not, therefore, necessary that she should
show that she had an interest in the life
of A. by which the policy could be sup-
ported as a policy to herself as the
assured." So also in American Ins. Co.
v. Robertshaiv, 2 Casey )89, where a
debtor insured his life for an amount
far exceeding the debt, and made it
payable to a creditor, Shahswood, J.,
in sustaining the policy, said : "It is
on the principles of public policy and
good morals alone that our courts avoid
wagering contracts. In this case the
contract was really made with Dyson ;
he insured his own life ; the considera-
tion moved from him ; the company
knew they were dealing with him ;
there was no fraud, misrepresentation
or concealment. I can see no good
reason why a man having an insurable
interest may not insure it, and present
the policy as a gift to a friend ; and
if such agreement to give be made at
the very time of the contract, why may
not the policy be made at once in the
name of the donee, the whole transac-
tion being bona fide 1"

In conflict, however, with these deci-
sions is the case of The Franklin Ins.
Co. v. Ha.xza.rd, 41 Ind. 116, in which
a policy for $3000 was issued, payable
to the assured, his executors, adminis-
trators and assigns ; he being unable to
pay the premium, sold it to the plaintiff
for $20. In an action against the com-
pany the court said: "In this case
there was but a simple purchase of the
policy by Hazzard. He had no interest
whatever in the life of the assured ; he
was a mere speculator upon the proba-
bilities of human life. His contract
of purchase was essentially a wager
upon the life of Cone, and its interests
lay in the payment of few or no inter-
mediate annual premiums and the early
happening of the event which was to
entitle him to the $3000. By his pur-
chase he became interested in the early
death of the assured. We are of opinion
that the law will not uphold such a pur-

92

CLAEK v. ALLEN.

chase, and that the plaintiff acquired no
right to the policy or to the sum secured
thereby. Life insurance policies are
assignable, to be sure ; but in our
opinion they are not assignable to one
who buys them merely as matter of
speculation without interest in the life
of the assured."

This case is followed by a late Kansas
case, The Missouri Valley Life Ins. Co.
v. Sturges (not yet reported), in which
one Haynes, having insured his life for
$2000, some time afterwards sold it to
one Sturges. Upon his death, the com-
pany were relieved from the payment
of the policy for the same reasons as
given in the last case.

But these cases are opposed to the
weight of authority, and in addition to
the cases already cited where the better
doctrine is recognised, there are several
more in which collateral questions are
principally discussed, but in which the
judgment is predicated upon the assign-
able nature of a policy of life insurance
as an ordinary chose in action. In
Phillips v. Eastwood, Lloyd & Goold
(Ir. Rep.) 270, Lord Scgden held that
a policy of insurance passed by will
under the words " all my bonds, deben-
tures and funded property. ' ' In Elliott's
Executor's Appeal, 14 Wright 75, Read,
J., in deciding that the assignment by
an insolvent debtor to his wife of poli-
cies to a large amount which he had
effected on his own life, was fraudulent,
said: "Policies in good offices, after
five or seven years' standing, are
always saleable, and a considerable
number are sold by auction every
year." " We noticed," says the Ed-
inburg Review of January 1859, " the
advertisement of a sale in Dublin of
twenty-seven policies of insurance in
various offices. It is worthy of remark
that they generally find purchasers at
fair values when effected in the first-
class offices. The offices themselves
will state the value of their own policies
for a fee, and the common practice is

to obtain the office value and that of an
independent actuary before the sale."
This well-recognised practice in Eng-
land has never had a doubt thrown upon
its legality, although the English courts
have been much more strictly bound
than ours by the statute of 14 Geo III.,
c. 48. In Fortescue v. Barnett, 3 Myl.
& Keen 35, B. made a voluntary assign-
ment by deed of a policy of insurance
upon his own life to trustees, for the
benefit of C. ; the deed was delivered to
the trustees, but the grantor retained
the policy in his possession. No notice
of the assignment was given to the
insurer, and B. subsequently surren-
dered for a valuable consideration the
policy to the insurer. Upon a bill filed
by the trustees to have the policy
replaced, the court held that the com-
plainants were entitled to the relief
prayed for. The assignable nature of
the policy is also fully recognised in
Crossley v. Glasgow Ins. Co., Law Rep.
4 Ch. Div. 421.

In Bond v. Bunting, 28 P. P. Smith
210, a wife having insured the life of
her husband for $10,000, joined with
him in executing an instrument under
seal, by which the amount insured
above the sum of $5000 was assigned
to a trustee for the children of the hus-
band by a former marriage. The court
never doubted, during a very elaborate
discussion of the case, that a policy of
insurance was an assignable chose in
action.

In several of the states, policies ef-
fected for the benefit of married women
on the lives of their husbands, by virtue
of the interpretation given to statutes
protecting them from their husband's
creditors are placed on a peculiar basis,
the courts holding that they are therefore
non-assignable : Unity Ins. Co. v. Du-
gatt, 118 Mass. 219, but in this case the
assignee was held to be entitled to a
return of the premiums he had paid
with interest. The same effect has been
given to a New York statute in Eadie v.

CLARK v. ALLEN.

93

Slimmon, 26 N. Y. 1, and Barry v.
Equitable Life Ins. Co., 59 Id. 587. In
both of these cases, however, the as-
signments were executed by the wives
under duress, so that the cases lose
force, as authorities upon the point for
which they are ordinarily cited. To
the same effect are Gould v. Emerson,
99 Mass. 154, and Knickerbocker Ins.
Co. v. Weitz, Id. 157. In Burroughs
v. State Ins. Co., 97 Mass. 359, where
a policy was taken out by a husband
and payable to his executors, for the
benefit of his wife and children, in the
manner directed by the intestate act,
and, subsequently, the husband and
wife assigned the policy to the plaintiff.
The wife predeceased her husband.
The plaintiff was held to be entitled to
recover the amount of the policy from
the company, the court saying that the
equitable rights of the children must be
settled in another form of action. In
Connecticut Ins. Co. v. Burroughs, 34
Conn. 305, which, however, was simply
an interpleader between the assignee and
the children, the policy was effected by
the husband payable to his wife, and if
she predeceased him then to the children.
The husband and wife assigned the pol-
icy, and the wife died before the husband,
upon his death, in this contest between
the assignee and the children, it was
held that the assignment only passed the
contingent interest of the wife, and as
that interest had lapsed by her death
the children's rights were not affected.
In Missouri, a policy taken out by a
wife on the life of her husband cannot
be assigned : Charter Oak Ins. Co. v.
Brand, 47 Mo. 419, but a policy taken
out by the husband for her benefit, he
paying the premiums may be assigned
by their joint instrument : Baker v.
Young, 47 Mo. 453.

3. The proposition then being estab-
lished that the insurer can not set np a
want of insurable interest in the life
insured on the part of the assignee, a
third class of cases arises, in which the

relative rights of the assignor and as-
signee of an insurance policy are dis-
cussed. The question of these cases
simply is, when a policy of life insur-
ance is assigned by a debtor to his cred-
itor, is such, assignment to be viewed
simply in the nature of an indemnity,
giving the creditor collateral security
which the debtor, or his estate, is enti-
tled to a return of upon the payment or
extinguishment of the debt which the
policy, was assigned to secure.

The only light an investigation of the
cases throws upon this question is that
in each particular case it is a question
of fact to be determined by the evidence.
It may, however, be profitable to con-
sider the facts of the cases, first, in
which the assignment has been construed
to be conditional, and the debtor or his
estate have been entitled upon payment
of the debt to have a return of the policy.

In Cunningham v. Smith's Executors,
20 P. F. Smith 458, a policy was ef-
fected by Smith upon his own life and
immediately assigned to Cunningham,
with whom the insured was about to
enter into relations as a commercial
correspondent at Vera Cruz, and in the
course of business likely to become in-
debted to. Cunningham paid the pre-
mium. Smith, very shortly after his
arrival at Vera Cruz, died of yellow
fever. A small sum of money had
been advanced to Smith by Cunning-
ham, upon whom a demand was now
made by Smith's executors for the
amount realized from the insurance
policy less the advances. The question
was left to the jury upon the evidence
to determine whether the assignment
was intended to be absolute or by way
of collateral security, and the jury found
that the intention of the parties was
that it was given as collateral security,
but the Supreme Court afterward review-
ing the evidence, held that there was no
evidence to submit to the jury in sup-
port of this hypothesis and reversed the
judgment.

94

CLARK v. ALLEN.

In Bruce v. Garden, Law Rep. 5
Chanc. 31, an army agent, to whom
an officer was largely indebted on the
balance of an account, effected in his
own name policies on the life of the
officer, and in his books the account of
the officer was charged with the pre-
miums paid, and with interest on the
balances, including premiums. It was
argued for the estate of the officer which
claimed the surplus of the amount re-
ceived from the policy after repayment
to the agent of the amount of the debt,
premiums and interest, that the fact of
charging the officer's account with the
amount of premiums paid evinced an
intention to treat the policy as collateral
security for the debt, but Lord Hath-
erly, reversing James, Vice- Chancel-
lor, said, " This case seems to come
within principles recognised by the
court, and the authorities on the subject
are so clear that we have only to con-
sider what is the effect of the evidence.
The court requires distinct evidence of
a contract that the creditor has agreed
to effect a policy and that the debtor
has agreed to pay the premiums, and in
that case the policy will be held in trust
for the debtor. I must, therefore, ex-
amine whether such a contract has been
established in this case." The evidence
was then reviewed, showing that Major
Bruce never knew that, these premiums
were being charged against him, and
that he never had agreed to pay them.

In Knox v. Turner, Law Rep, 5 Ch.
515, Knox beiug entitled to the income
of large sums of stock in consideration
of $3999 paid to him by Turner, cove-
nanted to pay to Turner an annuity of
$318 for his (Knox's) life, and assigned
the annual proceeds of the stock for secu-
rity, and further covenanted to appear
at an insurance office in order to have
his life insured, and to pay Turner ex-
tra premiums which might be imposed
in consequence of his going beyond the
seas. The deed contained a provision
enabling Knox to repurchase the an-

nuity at any time for $3999. Knox
subsequently repurchased the annuity,
and then demanded an assignment to
him of the policy of insurance, but Lord
Hatherly said, " The plaintiff in this
case has confused the purchase of a re-
deemable annuity with an advance as a
loan, two things quite different, not in
form merely, but in substance, for in
the latter case the person who receives
the money remains a debtor, in the
former case he does not. Major Knox
was obviously in want of money, and
might have raised it either by borrow-
ing or by the sale of a life annuity, the
latter plan being probably adopted in
order to evade the usury laws, but what-
ever was the motive he knew what he
was doing ; at present he would probably
mortgage his life interest and insure his
life, covenanting to pay the interest and
premiums, but then he would be a debtor,
and whenever the lender wanted to be
paid he might proceed to sue the bor-
rower, or might sell under a power of
sale, and the relation of debtor and
creditor would exist between them. If
the other plan was adopted, the person
in want of money might sell a life an-
nuity for a given sum and might reserve
the option of repurchasing the annuity
on given terms, but until the repurchase
the annuity would remain, and the
holder of the annuity would have no
one against whom to proceed, but must
depend upon his annuity for repayment.
No doubt, in making the bargain he
takes an annuity large enough to cover
the contingency of the death of the
grantor, which is in fact an aunuity
large enough to pay the interest, and to
insure the life of the grantor for the
principal. It was argued that this
policy of insurance was in fact bought
with Major Knox's money, but that
was not so, as the annuity was Turner's
until it was repurchased, and he could
either save it or spend it in premiums
or in any other way. As a prudent
man he laid out part of it in insuring
the life of Knox. But suppose he had

CLARK v, ALLEN.

95

not done so and had either kept the
money in a box or laid it out at interest,
could it then be pretended that Knox
would have any claim on the money so
accumulated, and does it make any dif-
ference that the money was invested in
another way ? I am altogether unable
to understand the view which is taken
by Knox in making this claim. Where
is the contract between Knox and Tur-
ner 1 The only thing alleged is that
the deed contains a provision that if
Knox goes abroad or enters the military
service again— in either of which cases
the purchaser of the annuity would find
a difficulty in securing his capital— then
Knox would repay the additional pre-
miums required. No doubt the pur-
chaser of the annuity intended it to be
large enough to pay him five per cent,
interest and the premiums necessary to
secure the capital, and he would be put
out of his calculations if Knox went
abroad, he therefore stipulated for a
further payment if he was put to extra
expense. I think that there is a funda-
mental error in treating this as a case
of debtor and creditor and in speaking
of this insurance money as property
created by Knox's money. I am un-
able to see that there was any relation
of debtor and creditor between Knox
and Turner and it appears to me that
the annuity belonged not to Knox, but
to the purchaser until Knox chose to
buy it back."

In Ashley v. Ashley, 3 Sim. 149
A. insured his life and afterwards
assigned the policy to B. for a nom-
inal consideration ; B. assigned it to
D. for a valuable consideration, and
then D. sold it to E. On a bill by D.
against E. for specific performance it
was held that D. had a good title and
that E. was bound to complete the con-
tract.

A distinguishing element in the deter-
mination of these cases seems to be,
whether the one whose life is insured
so contracts himself to pay the premi-

ums that an action could be maintained
against him by his creditor for that
amount. If such a contract is shown,
then the policy is to be regarded as col-
lateral security,, and the debtor is enti-
tled to it upon the extinguishment of
the principal debt : Frame v. Berade, 2
DeG. & J. 582.

Gottlieb v. Cranch, 4 DeG., M. & G.
440, is in facts like to Knnx v. Turner,
supra, and was decided upon similar
grounds.

In the following cases, however,
the debtor was held to be entitled
to a return of the policy upon the
extinguishment of the debt ; Drys-
dale v. Piggolt,. 8 DeGex, M. & G.
546, and Lake v. Burtton, Id. 440. In
both of these cases the contract was
interpreted to impose a liability upon
the debtor to pay the premiums. To
the same effect, Lea v. Hinton, 5 DeGex,
M. & G. 823.

In Cummuck v. Lewis, 15 Wallace
643, the evidence that the assign-
ment was intended simply as col-
lateral security, was indisputable, and
in Stevens v. Warren, 101 Mass. 564,
the court in a contest between the as-
signee and personal representatives of
the debtor refused to sustain an assign-
ment except for the amount of the debt
to be protected, the court saying, "the
general rule recognised by the courts
has been that no one can have an insur-
ance upon the life of another unless
he has an interest in the continuance
of that life. W. had no such interest
and could not legally have procured
insurance upon the life of Barton. We
understand the answer to deny that the
policy was held by W. as creditor and
for his security and to assert an abso-
lute right by purchase. The rule of
law against gambling policies could be
completely evaded if the court were to
give to such transfer the effect of equit-
able assignments to be sustained and
enforced against the representatives of
the assured." This position, however,

96

CLARK v. ALLEN.

is not supported by the weight of au-
thority.

4. A policy of life insurance being a
chose in action upon the death of the
party to whom it is payable during the
continuance of the life insured, passes
to his personal representatives. This
contingency is often expressly provided
for in the policy, in which case upon
the happening of the contingency it
becomes payable to the parties named.
This is especially so in cases where a
policy on the life of a husband is made
payable to a wife, and in case of her
death, the husband surviving, to the
children. But in the absence of such
provisions expressed in the policy,or of
Borne statutory enactment, the children
are only entitled to such portion of the
proceeds of the policy as under the in-
testate law they would take of the ordi-
nary personal estate.

In Deyinther's Appeal, 4 Weekly
Notes (Philadelphia) 95, a married
woman, the holder of a policy of insur-
ance on her husband's life, payable
generally to her executors, administra-
tors and assigns, died intestate in the
life of her husband ; upon his death, the
proceeds of the policy were paid to her
administrator, and it was held that the
husband's executor was entitled to that
proportion of the proceeds as a surviv-
ing husband took of his wife's personal-
ty under the intestate act, Shabswood,
J., saying, "The contention is, that as
the husband survived his wife the estate
vested in the wife's administrator at the
moment of his death, and that having
then ceased to exist, he could have had
no claim upon his wife's estate which
could pass to his personal representa-
tive. The argument appears to be too
refined. If it be a sound universal pro-
position that a man's representatives are
not entitled to anything not vested in
him at the time of his death, though
coming to his estate on the happening
of a subsequent contingency, neither
could the wife's representatives be enti-

tled under this construction of the law,
for she was not possessed of this pro-
perty at the time of her death."

In Huston v. MerrifieXd, 51 Ind. 24,
under similar circumstances there was a
similar decision, the court saying, "a
policy of insurance is a chose in action
governed by the same principles appli-
cable to other agreements involving pe-
cuniary obligations. A life policy is
an agreement to pay a sum of money
at the termination of the life insured.
Therefore as a chose in action, being
personal property upon the death of the
party holding and owning it, it would
vest in the heirs of such person, subject
to the payment of debts."

In Libby v. Libby, 37 Me. 359, a policy
was effected for the benefit of a wife, and
if she predeceased her husband, for their
children. The wife died first, and then
the children, last of all the father.
The next of kin of the children were
awarded the proceeds of the policy.

So in Continental Ins. Co. v. Palmer,
42 Conn. 60, a policy payable to
the children of the insured upon the
death of one of the payees passed to
his next of kin, the court saying, "The
moment this policy was executed and
delivered it became property and the
title to it vested in some one. It will
not be claimed that it vested in the
person whose life was insured. It must
then have vested in the payees. It was
visible, tangible property, and like any
other insurance policy it was capable
of assignment and had an appreciable
value."

In Massachusetts, however, by virtue
of statutory provisions, a policy in
favor of a wife upon her death before
her husband vests in her children abso-
lutely : Scan v. Snow, 11 Allen 224.

In Norberry v. Mitchell, 1 Barb. Ch.
264, a husband effected a policy on his
own life, payable to his wife, and in case
of her death, him surviving, to their
child. All three were lost at sea;
there being no evidence who was the

HERMES v. NORVELL.

97

survivor, the husband's administrator
was awarded the proceeds of the policy.
5. Policies effected by one relative
on the life of another are now sus-
tained without any evidence of direct
pecuniary relations existing between
them. The possible benefit which one
may be supposed to anticipate from the
continuance of the life of the other is
sufficient without actual loss or gain.
In JElna Insurance Co. v. France, 4 Otto
561, a policy by a sister on the life of
a brother, on whom she was not de-
pendent for support or pecuniary assist-
ance, was sustained. This extends the
doctrine of Lord v. Dall, 12 Mass. 115,
where the policy was taken out by a
sister who was in part maintained by
the brother whose life she insured. In

Kane v. Reserve Insurance Co., 3 Weekly
Notes (Philada. ) 201, it was decided
that an adult son might effect a valid
insurance on the life of his father, and
in Chisholm v. National Capital Ins. Co.,
52 Mo. 213, an unmarried woman upon
the life of the man to whom she was
engaged to be married. In AlcKee v.
Pharnix Ins. Co., 28 Mo. 383, a wife
effected an insurance on the life of her
husband, from whom she was subse-
quently divorced. It was held that the
policy was not thereby rendered void
for want of insurable interest. Mitchell
v. Union Ins. Co., 45 Me. 104, and
Loomis v. Eagle Ins. Co., 6 Gray 396,
establish the right of a parent to insure
the life of his child.

R. C. D., Je.

Supreme Court of New York.
WILLIAM HERRIES v. C. C. NORVELL, Impleaded, &c.

A reporter and a city editor of a newspaper are laborers or servants within the
meaning of a statute making stockholders personally liable for the services of
laborers and servants of the corporation.

The test as to who shall be deemed a laborer or servant within such a statute,
cannot be limited to manual labor only, nor that the person shall be, through igno-
rance, &c, incapable of guarding himself by a contract in advance, but must vary
according to the nature of the services in relation to the business.

This was an action against defendants as stockholders of a cor-
poration, known as the " New York Republican Newspaper Associa-
tion," formed under the general manufacturing law of 1848, and
the amendments thereof, for "work, labor and services," performed
for the corporation. The services, as the complaint alleged, were
rendered as "city editor," as "assistant city editor," and as
"reporter," for the newspaper published by the association. The
plaintiff was the assignee of the claims of the persons rendering the
services ; judgment had been recovered against the association upon
the claims, and execution returned unsatisfied. The defendant,
Norvell, demurred to the complaint.

Denis A. Spellissy, for plaintiff.

Tompkins Westervelt, for defendant.
Vol. XXVI — 13